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Legal consequences and 
protections Void contracts No 

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legal enforceability Contracts 
that violate statutory laws are 

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considered void and provide no 
legal recourse for enforcement. 

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Courts will not assist in 
enforcing or upholding the terms

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of such agreements. 
Restitution. 

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In some cases, courts may order 
restitution to prevent unjust 

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enrichment. 
This means that any benefits 

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conferred under the void 
contract must be returned to the

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other party. 
Example, if an unlicensed 

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contractor performs construction
work, they may be required to 

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return any payments received 
even though the contract itself 

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is void. 
Public protection, consumer 

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safety, licensing requirements, 
and usury laws are designed to 

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protect consumers from 
unqualified professionals and 

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exploitative financial 
practices. 

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By declaring such contracts 
void, the law upholds public 

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safety and fairness. 
Maintaining legal integrity. 

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By voiding contracts involving 
illegal activities or those 

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contrary to public policy, the 
legal system maintains its 

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integrity and societal 
standards. 

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Example A contract for the sale 
of stolen goods is void, 

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reinforcing the legal principle 
that crime should not pay and 

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preventing the enforcement of 
agreements that promote illegal 

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conduct. 
Summary of contracts contrary to

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statute Contracts that violate 
statutory law are void and 

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unenforceable. 
These include agreements 

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involving illegal activities, 
those entered into without 

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required professional licenses, 
and contracts that charge 

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interest rates exceeding 
statutory limits. 

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Such contracts are void to 
uphold public policy, protect 

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consumers, and maintain the 
integrity of the legal system. 

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Understanding these principles 
helps ensure that contracts are 

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legally valid and protect 
individuals from entering into 

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agreements that could have 
harmful legal and social 

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consequences. 
Contracts contrary to public 

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policy. 
Contracts that, while not 

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explicitly illegal, are deemed 
contrary to public policy are 

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unenforceable. 
These contracts are void because

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they conflict with societal 
interests or violate fundamental

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principles of justice and 
fairness. 

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Public policy aims to protect 
societal norms and values, and 

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contracts that undermine these 
objectives are not supported by 

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the legal system. 
Key points One Restraint of 

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trade definition. 
Contracts that unreasonably 

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restrained trade or competition 
are considered void unless they 

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meet specific criteria of 
reasonableness. 

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Restraint of trade clauses are 
often found in non compete 

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agreements, which restrict an 
individual's ability to engage 

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in similar business or 
employment after leaving a 

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company. 
Reasonableness Criteria For a 

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non compete agreement to be 
enforceable, it must be 

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reasonable in scope, duration, 
and geographic area. 

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It should protect legitimate 
business interests without 

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excessively limiting the 
individual's ability to earn a 

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livelihood. 
Example a non compete clause 

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that prevents a former employee 
from working in their field 

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anywhere in the world for 10 
years is likely void as it 

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excessively restrains trade. 
In contrast, a clause that 

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restricts the employee from 
working within a specific 

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industry within a certain city 
for one year may be considered 

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reasonable and enforceable. 2 
Unconscionable Contracts 

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Definition Contracts that are 
grossly unfair or oppressive to 

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one party are deemed 
unconscionable and thus 

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unenforceable. 
Unconscionability occurs when 

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there is a significant power 
imbalance between the parties 

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leading to terms that are 
unjustly favorable to one side. 

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Assessment Courts assess both 
procedural unconscionability 

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unfairness in the process of 
making the contract and 

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substantive unconscionability 
unfairness in the terms of the 

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contract to determine if a 
contract is unconscionable. 

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Example, a contract where one 
party agrees to extremely 

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unfavorable terms due to 
significant power imbalances or 

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lack of understanding might be 
deemed unconscionable. 

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For instance, a payday loan 
agreement with exorbitant 

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interest rates and hidden fees 
that a financially desperate 

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borrower agrees to under 
pressure may be ruled 

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unconscionable. 3 Contracts 
interfering with family 

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relations Definition Contracts 
that interfere with family 

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relations are against public 
policy and are therefore 

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unenforceable. 
These contracts might encourage 

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divorce, disrupt parental 
rights, or otherwise intrude on 

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family dynamics in a way that 
conflicts with societal values. 

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Rationale Public policy supports
the stability and integrity of 

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family relationships, and 
contracts that disrupt these 

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relationships are not upheld by 
the courts. 

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Example, a contract that offers 
money in exchange for a promise 

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to divorce a spouse is void. 
Similarly, a contract that 

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requires one parent to 
relinquish custody rights in 

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exchange for financial benefits 
would be against public policy 

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and unenforceable. 
Illustration of contracts 

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contrary to public policy 
Scenario One restraint of trade.

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Emily signs a non compete 
agreement with her employer that

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prevents her from working in the
software industry anywhere in 

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the country for five years after
leaving the company. 

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This agreement is likely void 
because it imposes an 

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unreasonable restraint on her 
ability to find employment in 

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her field. 
A court would likely reduce the 

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scope of the restriction to make
it reasonable or declare it 

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unenforceable altogether. 
Scenario 2. 

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Unconscionable contracts. 
Jake, facing financial hardship,

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agrees to a loan with the 
lender, who imposes an interest 

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rate of 200% and includes a 
clause allowing the lender to 

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seize Jake's assets without due 
process. 

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This contract is likely 
unconscionable because the terms

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are excessively unfair and 
exploitative, taking advantage 

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of Jake's vulnerable situation. 
Scenario 3. 

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Interfering with family 
relations Maria offers John 

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$50,000 to divorce his wife so 
that she can pursue a 

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relationship with him. 
This contract is void because it

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encourages divorce and 
interferes with the sanctity of 

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marriage. 
Conflicting with public policy, 

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legal consequences and 
protections. 

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Void contracts. 
No Enforcement Contracts that 

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are contrary to public policy 
are void and unenforceable. 

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Courts will not enforce these 
agreements or provide remedies 

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for breach of contract 
preventing exploitation. 

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By declaring such contracts 
void, the law protects 

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individuals and society from 
agreements that could cause harm

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or injustice. 
Reformation or severability 

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reformation. 
In some cases, courts may modify

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the terms of an unreasonable 
contract to make it reasonable 

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and enforceable. 
This is common with non compete 

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agreements, where overly broad 
restrictions may be narrowed 

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down to what is necessary to 
protect legitimate business 

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interests. 
Severability. 

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If a contract contains both 
valid and invalid provisions, 

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courts may enforce the valid 
parts while severing and voiding

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the provisions that are contrary
to public policy. 

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Example, a non compete agreement
that restricts an employee from 

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working in a similar field for 
an excessively long duration may

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be reformed by the court to 
limit the restriction to a 

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reasonable duration and 
geographic scope. 

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Public policy considerations 
Upholding societal values. 

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By voiding contracts contrary to
public policy, the legal system 

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reinforces societal values and 
norms. 

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This ensures that agreements do 
not undermine fundamental 

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principles of fairness, justice,
and public welfare. 

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Balancing interests Courts 
strive to balance the interests 

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of protecting legitimate 
business and individual rights 

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while preventing exploitation 
and preserving public policy. 

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Summary of contracts contrary to
public policy Contracts that 

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conflict with public policy are 
void and unenforceable, even if 

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they are not explicitly illegal.
This includes agreements that 

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unreasonably restrained trade, 
are unconscionable, or interfere

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with family relations. 
The legal system aims to protect

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societal interests, fairness, 
and justice by voiding such 

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contracts and ensuring that 
agreements uphold public policy 

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principles. 
Understanding these principles 

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helps individuals and businesses
avoid entering into 

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unenforceable agreements and 
promotes the creation of Fair 

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and just contracts. 
Unconscionable Contracts 

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Unconscionable contracts are 
those that are so unjust or 

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overwhelmingly 1 sided in favor 
of the party with superior 

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bargaining power that they are 
contrary to good conscience. 

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Courts may refuse to enforce 
such contracts or specific terms

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within them to prevent unfair 
exploitation and protect parties

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from abusive practices. 
The concept of unconscionability

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ensures fairness and equity and 
contractual dealings. 

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Key Points One Procedural 
unconscionability Definition 

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Procedural unconscionability 
focuses on the process of 

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contract formation. 
It occurs when there is 

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significant inequality in the 
bargaining process, often 

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involving lack of knowledge, 
understanding, or voluntary 

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assent by one of the parties. 
This type of unconscionability 

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examines how the contract was 
negotiated and the circumstances

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surrounding its creation. 
Indicators Indicators of 

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procedural unconscionability 
include high pressure sales 

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tactics, complex and 
incomprehensible language, 

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hidden terms in fine print, and 
significant disparities in 

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bargaining power between the 
parties. 

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Example a contract with hidden 
terms in fine print that a 

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consumer could not reasonably be
expected to notice. 

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If a consumer signs a lengthy 
and complicated contract without

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being made aware of crucial 
clauses buried in fine print, 

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this might constitute procedural
unconscionability. 2 Substantive

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Unconscionability Definition 
Substantive unconscionability 

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concerns the actual terms of the
contract and whether they are 

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overly harsh, 1 sided, or 
unfairly favorable to one party.

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It focuses on the content of the
agreement rather than the 

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circumstances of its formation. 
Indicators. 

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Indicators of substantive 
unconscionability include 

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exorbitant prices, oppressive or
one sided terms, lack of 

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mutuality, and obligations and 
provisions that shock the 

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conscience. 
Example, a contract requiring 

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one party to pay an exorbitant 
price for a service that 

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provides little to no benefit in
return. 

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For instance, a loan agreement 
with an interest rate of 200% 

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and severe penalties for late 
payments where the borrower 

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receives minimal benefit 
compared to the oppressive 

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obligations may be substantively
unconscionable. 

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Three remedies for 
unconscionable contracts. 

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Refusal to enforce. 
Courts can refuse to enforce the

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entire contract if it is deemed 
unconscionable, thereby voiding 

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the agreement and relieving the 
disadvantaged party from any 

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obligations under it. 
Severance of terms. 

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Courts may strike down specific 
unconscionable terms while 

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allowing the remainder of the 
contract to stand. 

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This approach targets the unfair
clauses without nullifying the 

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entire agreement. 
Reformation Courts can reform 

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the contract to make it fairer 
by modifying the unconscionable 

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terms to ensure equity and 
balance between the parties. 

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Example, A court might refuse to
enforce a clause that imposes 

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excessive penalties for minor 
breaches while allowing the rest

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of the contract to stand. 
If a contract includes a term 

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that penalizes a party $10,000 
for being one day late on a 

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payment, the court may strike 
down this penalty clause but 

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enforce the rest of the 
agreement. 

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Illustration of unconscionable 
contracts Scenario one. 

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Procedural unconscionability A 
consumer agrees to a door to 

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door salespersons offer for a 
home security system. 

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The salesperson pressures the 
consumer to sign immediately 

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without providing an opportunity
to read or understand the 

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lengthy contract. 
The contract includes terms that

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are significantly 
disadvantageous to the consumer,

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such as automatic renewal 
clauses with steep cancellation 

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fees hidden in fine print. 
This situation exemplifies 

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procedural unconscionability due
to the high pressure sales 

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tactics and hidden terms. 
Scenario two. 

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Substantive unconscionability An
elderly person enters into a 

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payday loan agreement with a 
lender who charges an interest 

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rate of 300% and includes a 
clause allowing the lender to 

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garnish wages without notice. 
The loan amount is $500.00, but 

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the total repayment, including 
fees and interest, is $2500 

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within six months. 
This contract is substantively 

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unconscionable due to the 
exorbitant interest rate and 

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harsh repayment terms that 
exploit the borrower's financial

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vulnerability, Legal 
consequences and protections. 

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Preventing exploitation, 
fairness, and contracting. 

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The doctrine of 
unconscionability ensures that 

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contracts are fair and just, 
protecting parties from 

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exploitation and abuse. 
It promotes ethical standards 

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and contractual dealings by 
scrutinizing both the process of

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contract formation and the 
substantive terms. 

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Equity courts aim to achieve 
equity by addressing power 

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imbalances and unfair terms, 
ensuring that contracts reflect 

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a fair bargain between parties 
of relatively equal standing. 

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Judicial intervention. 
Assessing unconscionability 

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Courts assess unconscionability 
by examining the circumstances 

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surrounding the contract's 
formation and its terms. 

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This involves a factual inquiry 
into the relative bargaining 

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power of the parties, the 
presence of unfair surprise, and

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the substantive fairness of the 
contract terms. 

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00:16:17,760 --> 00:16:21,800
Balancing interests Judicial 
intervention seeks to balance 

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the interests of protecting 
weaker parties and upholding the

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principle of freedom of 
contract. 

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00:16:28,280 --> 00:16:32,160
Courts do not lightly interfere 
with private agreements but will

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act to prevent manifest 
injustice. 

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Summary of Unconscionable 
contracts Unconscionable 

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contracts are those that are so 
unjust or overwhelmingly 1 sided

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that they are contrary to good 
conscience. 

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00:16:47,960 --> 00:16:51,600
Procedural unconscionability 
focuses on unfairness in the 

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00:16:51,600 --> 00:16:54,840
contract formation process, 
while substantive 

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unconscionability addresses the 
unfairness of the contract terms

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themselves. 
Courts may refuse to enforce 

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00:17:02,480 --> 00:17:07,480
unconscionable contracts, strike
down specific terms, or reform 

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00:17:07,480 --> 00:17:11,880
the contract to ensure fairness.
This doctrine protects 

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00:17:11,880 --> 00:17:15,560
individuals from exploitation 
and abuse, ensuring that 

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00:17:15,560 --> 00:17:17,800
contracts are equitable and 
just. 

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00:17:19,079 --> 00:17:22,359
Understanding these principles 
helps parties recognize and 

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00:17:22,359 --> 00:17:25,920
avoid unfair agreements 
promoting ethical and fair 

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00:17:25,920 --> 00:17:30,800
contractual practices. 
Practical Examples Practical 

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00:17:30,800 --> 00:17:34,280
examples help illustrate the 
application of legal principles 

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00:17:34,280 --> 00:17:38,160
related to contract law, 
particularly concerning capacity

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00:17:38,160 --> 00:17:41,080
issues, illegality, and 
unconscionability. 

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00:17:42,320 --> 00:17:45,920
Here are detailed explanations 
of three scenarios that 

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00:17:45,920 --> 00:17:51,360
highlight these concepts. 
Example One Capacity issues with

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00:17:51,360 --> 00:17:57,360
minors scenario a 16 year old 
signs a contract to purchase a 

268
00:17:57,360 --> 00:18:01,960
smartphone on an installment 
plan after using the phone for a

269
00:18:01,960 --> 00:18:05,880
month, the minor decides they 
cannot afford the payments and 

270
00:18:05,880 --> 00:18:11,560
seeks to disaffirm the contract.
Analysis Capacity of Minors 

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00:18:12,760 --> 00:18:16,840
Legal principle Minors, 
typically individuals under the 

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00:18:16,840 --> 00:18:21,040
age of 18, generally lack the 
capacity to enter into binding 

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00:18:21,040 --> 00:18:25,160
contracts. 
Contracts entered into by minors

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00:18:25,160 --> 00:18:28,800
are usually voidable at the 
minors discretion, meaning the 

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00:18:28,800 --> 00:18:31,960
miner can choose to honor or 
disaffirm the contract. 

276
00:18:33,320 --> 00:18:37,760
Right to disaffirm The miner has
the legal right to disaffirm the

277
00:18:37,760 --> 00:18:41,720
contract at any time before 
reaching the age of majority or 

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00:18:41,720 --> 00:18:43,720
within a reasonable time 
thereafter. 

279
00:18:45,000 --> 00:18:48,800
To disaffirm the contract, the 
miner must return the smartphone

280
00:18:48,800 --> 00:18:52,800
to the retailer. 
Restitution and wear and tear. 

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00:18:53,840 --> 00:18:58,840
Restitution Upon disaffirmation,
the miner must return the 

282
00:18:58,840 --> 00:19:03,040
smartphone to the retailer. 
The retailer must accept the 

283
00:19:03,040 --> 00:19:05,880
return and cancel any remaining 
payments. 

284
00:19:07,200 --> 00:19:11,200
Deduction for wear and tear 
While the miner can disaffirm 

285
00:19:11,200 --> 00:19:14,760
the contract, the retailer is 
entitled to deduct a reasonable 

286
00:19:14,760 --> 00:19:17,120
amount for wear and tear on the 
smartphone. 

287
00:19:18,440 --> 00:19:22,640
Conclusion The retailer must 
accept the return of the phone 

288
00:19:22,640 --> 00:19:24,640
and cancel the remaining 
payments. 

289
00:19:25,720 --> 00:19:28,840
They can deduct an amount 
reflecting the depreciation or 

290
00:19:28,840 --> 00:19:31,760
wear and tear of the phone 
during the month it was used. 

291
00:19:32,240 --> 00:19:37,280
Illustration Restitution 
Calculation If the smartphone 

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00:19:37,280 --> 00:19:42,320
was valued at $500 and it's used
for one month calls $50.00 worth

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00:19:42,320 --> 00:19:46,480
of wear and tear, the retailer 
can deduct $50 from the amount 

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00:19:46,480 --> 00:19:52,040
to be refunded to the minor. 
Example Two void contracts due 

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00:19:52,040 --> 00:19:58,080
to illegality Scenario Two 
businesses enter into a contract

296
00:19:58,240 --> 00:20:01,880
where one agrees to smuggle 
contraband across state lines. 

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00:20:02,960 --> 00:20:06,560
Since the agreement involves 
illegal activity, the contract 

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00:20:06,560 --> 00:20:11,760
is void and unenforceable. 
Analysis Illegality of the 

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00:20:11,760 --> 00:20:16,600
contract Legal principle. 
Contracts that involve illegal 

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00:20:16,600 --> 00:20:20,520
activities are void. 
They are unenforceable because 

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00:20:20,520 --> 00:20:23,680
they violate statutory law and 
public policy. 

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00:20:24,960 --> 00:20:28,360
No legal remedies. 
Because the contract involves 

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00:20:28,360 --> 00:20:32,720
smuggling contraband and illegal
activity, neither party can seek

304
00:20:32,720 --> 00:20:35,080
legal remedies for breach of 
this contract. 

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00:20:35,960 --> 00:20:38,320
Consequences. 
Avoid contracts. 

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00:20:39,600 --> 00:20:43,240
Lack of enforceability. 
Neither business can enforce the

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00:20:43,240 --> 00:20:48,360
contract terms or claim damages 
for non performance public 

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00:20:48,360 --> 00:20:52,280
policy consideration. 
The law refuses to support or 

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00:20:52,280 --> 00:20:56,480
uphold agreements that involve 
illegal acts as doing so would 

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00:20:56,480 --> 00:20:59,600
undermine the legal system and 
societal standards. 

311
00:21:00,040 --> 00:21:04,080
Conclusion The contract is void 
and unenforceable. 

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00:21:04,840 --> 00:21:07,880
Neither business can seek legal 
remedies for breach of this 

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00:21:07,880 --> 00:21:11,600
contract as the agreement 
involves illegal activities. 

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00:21:12,400 --> 00:21:17,200
Illustration Example. 
If business agrees to pay 

315
00:21:17,200 --> 00:21:21,840
business B $10,000 to smuggle 
goods and business B fails to 

316
00:21:21,840 --> 00:21:25,480
deliver, business cannot sue 
business B for breach of 

317
00:21:25,480 --> 00:21:28,920
contract. 
The courts will not enforce an 

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00:21:28,920 --> 00:21:31,480
agreement based on illegal 
activities. 

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00:21:32,440 --> 00:21:38,040
Example Three Public policy and 
unconscionability scenario. 

320
00:21:38,840 --> 00:21:42,160
A low income tenant agrees to a 
lease with a landlord that 

321
00:21:42,160 --> 00:21:45,600
includes a clause requiring the 
tenant to pay 10 times the 

322
00:21:45,600 --> 00:21:48,000
normal rent. 
If they breach any term of the 

323
00:21:48,000 --> 00:21:52,560
lease, The court finds this 
penalty clause unconscionable 

324
00:21:52,840 --> 00:21:56,240
and voids that specific term 
while the rest of the lease 

325
00:21:56,240 --> 00:22:02,080
remains enforceable. 
Analysis Unconscionability Legal

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00:22:02,080 --> 00:22:05,800
principle Unconscionable 
contracts are those that are so 

327
00:22:05,800 --> 00:22:09,840
unfair or one sided that they 
are contrary to good conscience.

328
00:22:11,000 --> 00:22:15,080
Courts may refuse to enforce 
such contracts or specific terms

329
00:22:15,080 --> 00:22:18,720
within them. 
Procedural and substantive 

330
00:22:18,720 --> 00:22:22,320
unconscionability. 
This scenario likely involves 

331
00:22:22,320 --> 00:22:25,520
both procedural 
unconscionability, significant 

332
00:22:25,520 --> 00:22:29,200
power imbalance and lack of 
negotiation, and substantive 

333
00:22:29,200 --> 00:22:32,320
unconscionability. 
Exorbitant penalty clause 

334
00:22:33,400 --> 00:22:38,200
remedies for unconscionability. 
Severance of unconscionable 

335
00:22:38,200 --> 00:22:40,680
terms. 
The court can sever the 

336
00:22:40,680 --> 00:22:44,120
unconscionable term from the 
lease agreement, making that 

337
00:22:44,120 --> 00:22:47,640
specific clause unenforceable 
while upholding the rest of the 

338
00:22:47,640 --> 00:22:52,960
lease reformation. 
Alternatively, the court could 

339
00:22:52,960 --> 00:22:56,280
reform the contract to make the 
penalty clause reasonable, 

340
00:22:56,560 --> 00:22:59,200
though severance is more common 
in such cases. 

341
00:23:00,440 --> 00:23:04,680
Conclusion The court finds the 
penalty clause unconscionable 

342
00:23:04,920 --> 00:23:08,880
and voids that specific term, 
ensuring that the tenant is not 

343
00:23:08,880 --> 00:23:11,560
subjected to an excessively 
harsh penalty. 

344
00:23:12,840 --> 00:23:16,520
The rest of the lease remains 
enforceable, allowing the tenant

345
00:23:16,520 --> 00:23:20,000
and landlord to continue their 
contractual relationship under 

346
00:23:20,000 --> 00:23:24,680
fair terms. 
Illustration Example If the 

347
00:23:24,680 --> 00:23:29,120
normal rent is $500 per month, 
the clause requiring the tenant 

348
00:23:29,120 --> 00:23:34,200
to pay $5000 for any breach, for
example, a late payment, is 

349
00:23:34,200 --> 00:23:37,800
unconscionable. 
The court voids this penalty 

350
00:23:37,800 --> 00:23:41,720
clause but enforces the rest of 
the lease, allowing the landlord

351
00:23:41,720 --> 00:23:44,880
to still collect regular rent 
and reasonable penalties. 

352
00:23:45,840 --> 00:23:50,520
Summary of Practical Examples 
These practical examples 

353
00:23:50,520 --> 00:23:54,920
illustrate how legal principles 
related to capacity, illegality 

354
00:23:55,080 --> 00:23:59,240
and unconscionability are 
applied to real world scenarios.

355
00:24:00,640 --> 00:24:05,280
Capacity issues with minors 
Minors can disaffirm Contracts 

356
00:24:05,520 --> 00:24:08,840
requiring restitution of goods 
and adjustment for wear and 

357
00:24:08,840 --> 00:24:12,760
tear. 
Void contracts due to illegality

358
00:24:13,560 --> 00:24:16,920
Contracts involving illegal 
activities are void and 

359
00:24:16,920 --> 00:24:20,400
unenforceable, providing no 
legal remedies for the parties 

360
00:24:20,400 --> 00:24:23,560
involved. 
Public policy and 

361
00:24:23,560 --> 00:24:26,560
unconscionability. 
Unconscionable terms and 

362
00:24:26,560 --> 00:24:30,720
contracts are voided to prevent 
unjust outcomes, while the rest 

363
00:24:30,720 --> 00:24:32,840
of the contract may remain 
enforceable. 

364
00:24:34,200 --> 00:24:37,200
Understanding these examples 
helps in recognizing the 

365
00:24:37,200 --> 00:24:41,280
application of contract law 
principles and ensuring fair and

366
00:24:41,280 --> 00:24:45,240
legally sound agreements. 
Summary of Chapter 3. 

367
00:24:46,160 --> 00:24:51,640
Chapter 3. 
Capacity and Legality Capacity 

368
00:24:51,640 --> 00:24:55,320
and legality are fundamental 
principles ensuring that parties

369
00:24:55,320 --> 00:24:58,720
entering into contracts are 
capable of understanding and 

370
00:24:58,720 --> 00:25:00,600
adhering to the agreements they 
make. 

371
00:25:01,920 --> 00:25:05,040
This chapter delves into the 
specifics of who has the 

372
00:25:05,040 --> 00:25:08,920
capacity to contract and what 
makes a contract legal or 

373
00:25:08,920 --> 00:25:16,200
illegal. 3.1 Capacity to 
contract Capacity refers to a 

374
00:25:16,200 --> 00:25:19,840
party's legal ability to enter 
into a binding contract. 

375
00:25:20,880 --> 00:25:24,120
Certain groups are recognized as
having limited capacity, 

376
00:25:24,120 --> 00:25:30,400
including minors, typically 
defined as individuals under 18.

377
00:25:30,840 --> 00:25:33,880
Minors can void contracts at 
their discretion. 

378
00:25:34,920 --> 00:25:38,120
They have the right to disaffirm
contracts before reaching the 

379
00:25:38,120 --> 00:25:41,560
age of majority or within a 
reasonable time after. 

380
00:25:42,160 --> 00:25:45,520
Exceptions include contracts for
necessities which are 

381
00:25:45,520 --> 00:25:49,640
enforceable. 
Example, a 16 year old 

382
00:25:49,640 --> 00:25:53,080
purchasing a smartphone on an 
installment plan can return the 

383
00:25:53,080 --> 00:25:56,720
phone and cancel the payments, 
subject to reasonable wear and 

384
00:25:56,720 --> 00:26:00,560
tear deductions. 
Mental incapacity. 

385
00:26:01,080 --> 00:26:04,520
Individuals lacking mental 
capacity due to mental illness 

386
00:26:04,520 --> 00:26:08,280
or cognitive impairments can 
void contracts if they did not 

387
00:26:08,280 --> 00:26:11,360
understand the nature and 
consequences of the agreement. 

388
00:26:12,680 --> 00:26:16,480
Contracts for necessities are 
enforceable to ensure access to 

389
00:26:16,480 --> 00:26:20,400
essential goods and services. 
Example. 

390
00:26:21,080 --> 00:26:25,000
A person with dementia entering 
a contract may have it voided by

391
00:26:25,000 --> 00:26:28,160
a legal guardian if it is shown 
they did not comprehend the 

392
00:26:28,160 --> 00:26:32,840
agreement. 
Intoxication contracts made 

393
00:26:32,840 --> 00:26:37,160
under severe intoxication can be
voided if the intoxicated person

394
00:26:37,160 --> 00:26:40,160
proves they were incapable of 
understanding the contract. 

395
00:26:41,360 --> 00:26:44,920
Upon sobering up, they must act 
promptly to disaffirm the 

396
00:26:44,920 --> 00:26:49,960
contract. 
Example a heavily intoxicated 

397
00:26:49,960 --> 00:26:53,840
person signing a contract at a 
party can void it the next day 

398
00:26:53,840 --> 00:26:56,600
if they can demonstrate their 
inability to understand the 

399
00:26:56,600 --> 00:27:03,720
terms due to intoxication. 3.2 
Legality of contracts For a 

400
00:27:03,720 --> 00:27:07,320
contract to be enforceable, it 
must have a legal purpose and 

401
00:27:07,320 --> 00:27:09,560
comply with statutory 
requirements. 

402
00:27:10,960 --> 00:27:15,400
Contracts contrary to statute. 
These are void if they involve 

403
00:27:15,400 --> 00:27:18,920
illegal activities or fail to 
meet legal requirements. 

404
00:27:19,040 --> 00:27:24,880
Examples Illegal activities A 
contract to smuggle contraband 

405
00:27:24,880 --> 00:27:27,560
is void as it involves illegal 
acts. 

406
00:27:28,760 --> 00:27:32,200
Licensing requirements. 
A contract for professional 

407
00:27:32,200 --> 00:27:36,200
services by an unlicensed 
individual in a regulated field 

408
00:27:36,360 --> 00:27:38,720
may be void to protect public 
welfare. 

409
00:27:40,000 --> 00:27:44,040
Usury laws Loan agreements 
charging interest rates above 

410
00:27:44,040 --> 00:27:47,360
statutory limits are 
unenforceable or subject to 

411
00:27:47,360 --> 00:27:51,280
reformation. 
Contracts Contrary to public 

412
00:27:51,280 --> 00:27:54,600
policy. 
These contracts are void if they

413
00:27:54,600 --> 00:27:58,560
harm societal interests or 
violate principles of justice. 

414
00:27:59,040 --> 00:28:04,440
Examples Restraint of trade Non 
compete agreements that 

415
00:28:04,440 --> 00:28:08,320
unreasonably limit trade may be 
void unless they are reasonable 

416
00:28:08,320 --> 00:28:13,960
in scope and duration. 
Unconscionable contracts Grossly

417
00:28:13,960 --> 00:28:18,200
unfair or one sided contracts 
can be voided or reformed by 

418
00:28:18,200 --> 00:28:21,480
courts. 
Interference with family 

419
00:28:21,480 --> 00:28:26,000
relations Contracts that disrupt
family dynamics, like those 

420
00:28:26,000 --> 00:28:32,480
encouraging divorce, are void. 
Summary Chapter 3 emphasizes the

421
00:28:32,480 --> 00:28:35,960
importance of capacity and 
legality in contract law, 

422
00:28:36,480 --> 00:28:39,520
ensuring that agreements are 
made by parties with the ability

423
00:28:39,520 --> 00:28:42,440
to understand them and for 
lawful purposes. 

424
00:28:43,560 --> 00:28:47,600
This ensures fairness, protects 
vulnerable parties and upholds 

425
00:28:47,600 --> 00:28:48,600
public policy.